Archive for March 27th, 2011

My previous post looked at the federal government’s troubling decision to investigate, persecute, prosecute, and ultimately imprison a random home-loan borrower named Charlie Engle for the crime of mortgage fraud. Citing a column on the legal fallout from the financial crisis in the New York Times, I noted that it was rather odd that the government would target a nobody like Mr. Engle while letting all the big fish swim away.

This story certainly paints a picture of a government that has one set of rules for ordinary people, but an entirely different set of rules for the political elite and those who make big campaign contributions to that ruling class. But I also noted that I’m not a legal expert and was unsure about the degree to which the big players actually broke laws, or whether they simply made stupid business decisions (often encouraged by bad government policy).

The most upsetting part of the story, though, is how the government wound up targeting Mr. Engle. It turns out that an IRS agent, Robert Norlander, must have been competing for the IRS’s Thug-of-the-Year Award (or maybe it was A-Hole-of-the-Year or Jerk-of-the-Year) because here are some of the things he did:

o Mr. Norlander decided to snoop into Mr. Engle’s because he saw a film about him training for a marathon. In other words, there was no probable cause, no reasonable suspicion, nothing. Just the perverse decision of an IRS bully to go after someone.

o Mr. Norlander admitted a pattern of thuggish behavior, stating that he will snoop into someone’s private life simply because that person drives an expensive car.

o Mr. Norlander continued to investigate and persecute Mr. Engle, subjecting him to undercover surveillance, even though his tax returns showed no wrongdoing.

o Mr. Norlander even engaged in “dumpster dives” to look for evidence of wrongdoing in Mr. Engle’s garbage. Keep in mind that there is no probable cause, no reasonable suspicion, and Engle’s tax returns were legit.

o Mr. Norlander used a sleazy KGB tactic by sending an attractive woman to flirt with Mr. Engle in hopes of getting him to somehow admit to a crime.

o Mr. Norlander failed to find any evidence of a tax crime. He couldn’t even hit Engle with a money-laundering offense. But the undercover agent who was part of the “honey trap” was wearing a wire and supposedly got Engle to admit to mortgage fraud and Norlander used that extremely flimsy evidence to justify a Justice Department case against Mr. Engle.

In other words, this whole thing has a terrible stench. Assuming the details in the story are accurate, we have an IRS agent engaging in a vendetta against someone, and then apparently justifying his jihad by figuring out how to nail the guy for a very weak charge of mortgage fraud. I would refer to Mr. Norlander as a “rogue agent,” but apparently his jackboot behavior is business-as-usual at the IRS.

Mr. Engle received $30,000 for his participation. The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.) Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly. In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments. …Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire. …No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.

Now you understand why I’m a libertarian. As George Washington is reported to have stated, “Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master.”

Unfortunately, thanks to bad laws and thuggish bureaucrats, that government is now our master.

Joe Nocera has a must-read story in the New York Times about how the legal fallout from the financial crisis. His basic theme is that the government let all the bigwigs get away with their crimes, but then has a fascinating discussion about how the government targeted an inconsequential mortgage borrower.

I’m not sure I accept the first part of his premise. There were lots of sleazy people taking advantage of the perverse system created by bad government policy, but I would like to see some clear evidence of actual crimes before hopping on that bandwagon. Selling mortgage-backed securities filled with crummy home loans to Fannie Mae and Freddie Mac may have been immoral, for instance (at least from a libertarian perspective), but I’m not aware that it is against the law to make choices that hurt the economy – particularly when government policy is designed to reward such stupidity.

That being said, I do wonder why there haven’t been any bribery prosecutions of the politicians who got sweetheart loans as part of the “Friends of Angelo” scheme. Actually, I don’t wonder why politicians such as Chris Dodd and Kent Conrad got a free ride. Politicians operate by the principle that law are only for the little people. Nonetheless, these are examples of real laws being violated.

But I’m digressing. The purpose of this post is to show how the government decided to go through great effort and expense to nail someone who, at most, was willing to go along with the government-subsidized and government-created housing scam.

A few weeks ago, when the Justice Department decided not to prosecuteAngelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis. …There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. …Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets? No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans. …It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. …Even the jurors seemed confused about how to think about Mr. Engle’s supposed crime. When it came time to pronounce a verdict, the jury found him not guilty of providing false information to the bank, which would seem to be the only fraud he could possibly have committed. Yet it still found him guilty of mortgage fraud. “I think the prosecution convinced the jury that I was guilty of something but they weren’t sure what,” Mr. Engle wrote in an e-mail. …Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence, Mr. Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America. Angelo Mozilo ought to get a good chuckle out of that one.

Later today, by the way, I’ll post about the IRS’s disgusting role in this story.

Like this:

Found this joke in my inbox this morning. As with many of these jokes, it gets reworked with each new occupant of the White House. In the past, I’ve seen versions with both Bush and Clinton. Enjoy.

Obama goes on a State visit to Israel. While he is on a tour of Jerusalem, he has a fatal heart attack.

The undertaker tells the U.S. diplomats: “You can have him shipped home for $1 million or you can bury him here in the Holy Land for $100”.

The U.S. diplomats go into a huddle and come back to the undertaker and tell him they still want Obama flown home.

The undertaker is puzzled and asks: “Why would you spend $1 million to get him home when it would be wonderful to be buried here in this religious country and you would only spend $100?”.

One diplomat replied: “More than 2000 years ago a man died here, was buried here, and just 3 days later he rose from the dead. We simply can’t take that risk”.

This joke, and its morbid theme, led to me to peruse my archives and I found these two gems about Bill Clinton.

One day Bill Clinton slipped away from the Secret Service and was out jogging. He accidentally tripped and fell off a bridge into the cold water below.

Three 10-year-old boys were playing along the river and saw him fall in so they all jumped in and saved him and dragged him to shore. He was so thankful that he told each of them, “Boys, you just saved the President of the United States and each of you deserve a reward.”

The first boy says, “I want to go to Disneyland!”

“I’ll take you there myself!!!” exclaims Bill.

The second boy says, “I want a brand new pair of autographed Air Jordan’s.

“I’ll buy them for you myself,” says Bill.

The third boy says “I want a motorized wheelchair with a stereo built into it with custom speakers.”

The president looks at the boy and says, “But son you don’t look like you are handicapped to me”

The boy says, “I’m going to be when my dad finds out I saved your ass from drowning!!”

And here’s the second one.

Air Force One crashed on a farm in the middle of rural America. Panic stricken, the Secret Service mobilized and descended in force. When they got there, the wreckage was clear. The aircraft was totally destroyed, with only a burned hulk left smoldering in a tree line that bordered a farm.

The Secret Service descended upon the smoking hulk, but could find no remains of the crew or the President’s staff. To their amazement, a lone farmer was plowing a field not too far away as if nothing at all happened. They hurried over to surround the man’s tractor.

“Sir,” the senior Secret Service agent asked, panting and out of breath, “Did you see this terrible accident happen?”

Yep. Sure did.” The man muttered, unconcernedly.

“Do you realize that is the President of the United States airplane?”

Yep.”

“Were there any survivors?” the agent gasped.

“Nope. They’s all kilt straight out.” The farmer sighed, cutting off his tractor motor. “I done buried them all myself. Took most of the morning.”

“The President of the United States is DEAD?” The agent gulped in disbelief.

“Well,” the farmer sighed, obviously wanting to get back to his work, “He kept a-saying he wasn’t … but you know what a liar he is.”